Elizabeth Yates wrote of Sir Gibbie, "It moved me the way books did when, as a child, the great gates of literature began to open and first encounters with noble thoughts and utterances were unspeakably thrilling."[3]

Even Mark Twain, who initially disliked MacDonald, became friends with him, and there is some evidence that Twain was influenced by MacDonald.[4] Christian author Oswald Chambers (1874–1917) wrote in Christian Disciplines, vol. 1, (pub. 1934) that "it is a striking indication of the trend and shallowness of the modern reading public that George MacDonald's books have been so neglected".

MacDonald grew up in the Congregational Church, with an atmosphere of Calvinism. But MacDonald never felt comfortable with some aspects of Calvinist doctrine; indeed, legend has it that when the doctrine of predestination was first explained to him, he burst into tears (although assured that he was one of the elect). Later novels, such as Robert Falconer and Lilith, show a distaste for the idea that God's electing love is limited to some and denied to others.

McDonald graduated from the University of Aberdeen, and then went to London, studying at Highbury College for the Congregational ministry.

In 1850 he was appointed pastor of Trinity Congregational Church, Arundel, but his sermons (preaching God's universal love and the possibility that none would, ultimately, fail to unite with God) met with little favour and his salary was cut in half. Later he was engaged in ministerial work in Manchester. He left that because of poor health, and after a short sojourn in Algiers he settled in London and taught for some time at the University of London. MacDonald was also for a time editor of Good Words for the Young, and lectured successfully in the United States during 1872–1873.

MacDonald also served as a mentor to Lewis Carroll (the pen-name of Rev. Charles Lutwidge Dodgson); it was MacDonald's advice, and the enthusiastic reception of Alice by MacDonald's many sons and daughters, that convinced Carroll to submit Alice for publication.[7] Carroll, one of the finest Victorian photographers, also created photographic portraits of several of the MacDonald children.

George MacDonald with son Ronald (right) and daughter Mary (left) in 1864. Photograph by Lewis Carroll.

In 1877 he was given a civil list pension. From 1879 he and his family moved to Bordighera[8] in a place much loved by British expatriates, the Riviera dei Fiori in Liguria, Italy, almost on the French border. In that locality there also was an Anglican Church, which he attended. Deeply enamoured of the Riviera, he spent there 20 years, writing almost half of his whole literary production, especially the fantasy work.[9] In that Ligurian town MacDonald founded a literary studio named Casa Coraggio (Bravery House), which soon became one of the most renowned cultural centres of that period, well attended by British and Italian travellers, and by locals. In that house representations were often held of classic plays, and readings were given of Dante and Shakespeare.[10]

In 1900 he moved into St George's Wood, Haslemere, a house designed for him by his son, Robert Falconer MacDonald, and the building overseen by his eldest son, Greville MacDonald. He died on 18 September 1905 in Ashtead, (Surrey). He was cremated and his ashes buried in Bordighera, in the English cemetery, along with his wife Louisa and daughters Lilia and Grace.

As hinted above, MacDonald's use of fantasy as a literary medium for exploring the human condition greatly influenced a generation of such notable authors as C. S. Lewis (who featured him as a character in his The Great Divorce),[11]J. R. R. Tolkien, and Madeleine L'Engle. MacDonald's non-fantasy novels, such as Alec Forbes, had their influence as well; they were among the first realistic Scottish novels, and as such MacDonald has been credited with founding the "kailyard school" of Scottish writing.[12]

His son Greville MacDonald became a noted medical specialist, a pioneer of the Peasant Arts movement, and also wrote numerous fairy tales for children. Greville ensured that new editions of his father's works were published. Another son, Ronald MacDonald, was also a novelist.[13] Ronald's son, Philip MacDonald, (George MacDonald's grandson) became a very well known Hollywood screenwriter.

MacDonald rejected the doctrine of penal substitutionary atonement as developed by John Calvin, which argues that Christ has taken the place of sinners and is punished by the wrath of God in their place, believing that in turn it raised serious questions about the character and nature of God. Instead, he taught that Christ had come to save people from their sins, and not from a Divine penalty for their sins. The problem was not the need to appease a wrathful God but the disease of cosmic evil itself. George MacDonald frequently described the Atonement in terms similar to the Christus Victor theory. MacDonald posed the rhetorical question, "Did he not foil and slay evil by letting all the waves and billows of its horrid sea break upon him, go over him, and die without rebound—spend their rage, fall defeated, and cease? Verily, he made atonement!"

George MacDonald with his wife Louisa in 1901 at their 50th wedding anniversary.

MacDonald was convinced that God does not punish except to amend, and that the sole end of His greatest anger is the amelioration of the guilty.[14] As the doctor uses fire and steel in certain deep-seated diseases, so God may use hell-fire if necessary to heal the hardened sinner. MacDonald declared, "I believe that no hell will be lacking which would help the just mercy of God to redeem his children."[15] MacDonald posed the rhetorical question, "When we say that God is Love, do we teach men that their fear of Him is groundless?" He replied, "No. As much as they fear will come upon them, possibly far more. ... The wrath will consume what they call themselves; so that the selves God made shall appear."

However, true repentance, in the sense of freely chosen moral growth, is essential to this process, and, in MacDonald's optimistic view, inevitable for all beings (see universal reconciliation). He recognised the theoretical possibility that, bathed in the eschatological divine light, some might perceive right and wrong for what they are but still refuse to be transfigured by operation of God's fires of love, but he did not think this likely.[citation needed]

In his introduction to George MacDonald: An Anthology, C. S. Lewis speaks highly of MacDonald's theology:

"This collection, as I have said, was designed not to revive MacDonald's literary reputation but to spread his religious teaching. Hence most of my extracts are taken from the three volumes of Unspoken Sermons. My own debt to this book is almost as great as one man can owe to another: and nearly all serious inquirers to whom I have introduced it acknowledge that it has given them great help—sometimes indispensable help toward the very acceptance of the Christian faith.

... I know hardly any other writer who seems to be closer, or more continually close, to the Spirit of Christ Himself. Hence his Christ-like union of tenderness and severity. Nowhere else outside the New Testament have I found terror and comfort so intertwined. ... In making this collection I was discharging a debt of justice. I have never concealed the fact that I regarded him as my master; indeed I fancy I have never written a book in which I did not quote from him. But it has not seemed to me that those who have received my books kindly take even now sufficient notice of the affiliation. Honesty drives me to emphasize it."

Christianceltic punk band Ballydowse have a song called "George MacDonald" on their album Out of the Fertile Crescent. The song is both taken from MacDonald's poem "My Two Geniuses" and liberally quoted from Phantastes.[citation needed]

American classical composer John Craton has utilized several of MacDonald's stories in his works, including "The Gray Wolf" (in a tone poem of the same name for solo mandolin – 2006) and portions of "The Cruel Painter", Lilith, and The Light Princess (in Three Tableaux from George MacDonald for mandolin, recorder, and cello – 2011).[citation needed]

Jazz pianist and recording artist Ray Lyon has a song on his CD Beginning to See (2007), called "Up The Spiral Stairs", which features lyrics from MacDonald's 26 and 27 September devotional readings from the book Diary of an Old Soul.[citation needed]

Rock group The Waterboys titled their album Room to Roam (1990) after a passage in MacDonald's Phantastes, also found in Lilith. The title track of the album comprises a MacDonald poem from the text of Phantastes set to music by the band. The novels Lilith and Phantastes are both named as books in a library, in the title track of another Waterboys album, Universal Hall (2003). (The Waterboys have also quoted from C. S. Lewis in several songs, including "Church Not Made With Hands" and "Further Up, Further In", confirming the enduring link in modern pop culture between MacDonald and Lewis.)